Asian Shares Fluctuate After Three-Day Selloff: Markets Wrap

Asian equities swung between small gains and losses as investors weighed the fallout from the selloff in global stocks, with traders watching whether regional markets can stabilise after Wall Street’s sharp losses.

MSCI’s stocks gauge for Asia Pacific fell around 0.1% after the index had its biggest drop since early April. 

Contracts for US stocks edged lower in early Asian trade after the S&P 500 index fell for a fourth day. A basket of the Magnificent Seven companies declined 1.8%. Nvidia Corp., at the center of the AI frenzy, slumped 2.8% ahead of its earnings report after Wednesday’s close.

Bitcoin steadied to trade around $92,500 after briefly dropping below $90,000 Tuesday to spook market sentiment.

A selloff in the world’s largest technology companies drove stocks to their longest slide since August, underscoring the US market’s narrow reliance on a handful of growth giants. Wall Street has grown increasingly concerned that AI isn’t yet generating enough revenue or profits to justify the massive spending on infrastructure. 

"The question isn’t really whether we’re in a bubble," said Sonu Varghese at Carson Group. “The real question is how long the current trend in AI spending will last and how bad the fallout will be when it ends.” 

The S&P 500 is down more than 3% this month, on pace for its worst November since 2008. Volatility has roared back. Wall Street’s so-called fear gauge, the Cboe Volatility Index, topped 24 — above the key 20 level that causes concern for traders — and reached its highest in a month.

Another major focus for investors is whether the Federal Reserve will cut interest rates next month. Traders have less conviction about another reduction in borrowing costs, with swaps now implying a less-than-50% likelihood of a December move. Several policymakers have recently cautioned against one, citing the risk of inflation, although Fed Governor Christopher Waller repeated his view in favor of lowering rates.

Treasuries are on course for their first back-to-back gains of the month, edging higher amid the selloff in stocks and fresh signs of weakness in the US labour market. The yield on 10-year Treasuries slid three basis points to 4.11%.

Jobless claims totalled 232,000 in the week ended Oct. 18, according to the Labor Department website showing historical data for claims. Companies shed 2,500 jobs per week on average in the four weeks ended Nov. 1, according to ADP Research. 

The September US jobs report is scheduled to be released on Thursday after a lengthy delay.

The ADP snapshot of the labour market has helped bridge the gap with official employment data delayed by the longest government shutdown in history. While funding to official statistics agencies has been restored, it’s still unclear when October economic data will be issued.

"The stock market has started to doubt the Fed’s ability to cut rates in December, so should Thursday’s jobs report come in weaker than expected, it may clear the path for the Fed to cut in December and fuel the Santa Claus rally we anticipate, which could push the S&P 500 to 7,100 by year-end," said James Demmert at Main Street Research.

Back to Nvidia, the company has grown larger than the energy, materials, and real-estate sectors combined and depending on the day, it even exceeds the combined weight including the utilities sector, according to Ryan Grabinski at Strategas. It’s also bigger than the entire industrials sector. 

"The outcome is likely to send ripple effects through both US and international markets," Grabinski said. "Although expectations for AI more broadly have cooled in recent weeks, this report has the potential to shift sentiment back to optimism. That said, the bar is undeniably high right now."

Meanwhile, Microsoft Corp. and Nvidia are committing to invest up to a combined $15 billion in Anthropic PBC, in a move that ties the AI developer closer to two of the biggest backers for its rival OpenAI.

Among commodities, oil rose as hawkish rhetoric by the European Union’s top diplomat raised expectations that sanctions on Russia will tighten. Gold wavered.

Elsewhere, China sold €4 billion ($4.6 billion) of euro-denominated bonds, drawing record demand in the latest sign of growing investor appetite for the country’s debt sales.

Corporate News:

• Baidu Inc. posted its biggest quarterly revenue slide on record, highlighting a weakening advertising business while it tries to keep up in the artificial intelligence race.

• PDD Holdings Inc. warned of a slowdown in an intensively competitive Chinese consumption environment, reflecting an escalating battle in online commerce with sector leaders such as Alibaba Group Holding Ltd.

• Xiaomi Corp. reported quarterly profit from its electric vehicle business for the first time, a major milestone for the smartphone maker’s ambitious foray into the crowded market.

• Shares of Contemporary Amperex Technology Co. Ltd., up 92% since their listing in Hong Kong this May, are bracing for a crucial test as selling restrictions on early investors expire on Wednesday.

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.1% as of 9:08 a.m. Tokyo time

• Hang Seng futures rose 0.5%

• Japan’s Topix fell 0.2%

• Australia’s S&P/ASX 200 was little changed

• Euro Stoxx 50 futures fell 1.9%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was unchanged at $1.1581

• The Japanese yen was little changed at 155.46 per dollar

• The offshore yuan was little changed at 7.1113 per dollar

• The Australian dollar was little changed at $0.6503

Cryptocurrencies

• Bitcoin rose 0.1% to $92,563.78

• Ether rose 0.2% to $3,103.71

Bonds

• The yield on 10-year Treasuries was unchanged at 4.11%

• Japan’s 10-year yield advanced 1.5 basis points to 1.760%

• Australia’s 10-year yield declined one basis point to 4.43%

Commodities

• West Texas Intermediate crude fell 0.1% to $60.66 a barrel

• Spot gold rose 0.1% to $4,073 an ounce